Corporate tax cuts could juice up the rally by 10%, says this $405 billion portfolio manager

It could morph into a vital part of the rally — one that affects the investments at money management firms across America.

Eaton Vance portfolio manager Michael Allison says tax reform could help drive stocks up by 5 percent to 10 percent more.

"There is some sense of positive movement on tax reform — certainly on the corporate side," Allison said Wednesday on CNBC's "Trading Nation." "[What] we're spending a lot of time on is really thinking about the changes under the hood."

A corporate tax cut could beef up earnings among companies that currently face a relatively high rate, he said.

It's just one market-moving factor Eaton Vance is watching. The firm manages $405 billion in assets.

Yet there appears to be growing doubt tax reform will be passed — at least at the Federal Reserve.

San Francisco Fed President John Williams acknowledged on Wednesday that he's getting a "little bit discouraged" about whether Capitol Hill can approve one in the next six months or so.

Despite the climbing uncertainty, stocks have been on a tear during the past four weeks.

Stocks locked in another milestone on Wednesday. The Dow and S&P 500 soared to new intraday records, while the Nasdaq closed at an all-time high.

It's that momentum that's keeping Allison "cautiously optimistic" going into next year. A failure by Washington to approve a tax reform package wouldn't kill the stock market rally, but gains would be more muted, he said.

"There are other factors powering the market, as well, in terms of just a sense of accelerating global growth [and] economic growth," he said.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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